Bush changes mind, may save auto giants

Facing the potential bankruptcy of iconic American firms, President George W. Bush on Friday abandoned his long-standing objection to using the Wall Street bailout fund to help save GM and Chrysler.

A frustrated Republican congressional official said: "If only they had said this last week, we could have saved ourselves a full week."

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Ten hours after the Senate rejected a separate lifeline for the automakers, White House press secretary Dana Perino said in a statement that it would be "irresponsible" to let the companies crash. So she said Bush will "consider other options," including the $700 billion Troubled Assets Relief Program that Congress created for the Treasury Department in October.

"Under normal economic conditions, we would prefer that markets determine the ultimate fate of private firms," Perino said in a statement. "However, given the current weakened state of the U.S. economy, we will consider other options if necessary — including use of the TARP program — to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time."

A Republican senator told Politico that Vice President Dick Cheney had told senators Thursday that it could be "Herbert Hoover time" if the bailout failed, which it did several hours later.

Democratic congressional leaders had urged Bush to take that step, but Treasury Secretary Henry Paulson and other administration officials insisted the original bailout was limited to the financial sector.

The beginning of Perino's statement was: "It is disappointing that while appropriate and effective legislation to assist and restructure troubled automakers received majority support in both houses, Congress nevertheless failed to pass final legislation. The approach in that legislation provided an opportunity to use funds already appropriated for automakers, and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds go only to firms whose stakeholders were prepared to make the difficult decisions to become viable, competitive firms in the future."

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Perino ended by saying: "While the federal government may need to step in to prevent an immediate failure, the auto companies, their labor unions, and all other stakeholders must be prepared to make the meaningful concessions necessary to become viable.

Ford has said it can operate without federal money for now, but analysts said General Motors and Chrysler might not make it to President-elect Barack Obama's inauguration on Jan. 20.

Shortly after the White House announcement, Obama said in a statement: "I am disappointed that the Senate could not reach agreement on a short-term plan for the auto industry. I share the frustration of so many about the decades of mismanagement in this industry that has helped deliver the current crisis."

"Those bad practices cannot be rewarded or continued. But I also know that millions of American jobs rely directly or indirectly on a viable auto industry, and that the beginnings of reform are at hand. The revival of our economy as a whole should not be a partisan issue. So I commend those in Congress as well as the administration who tried valiantly to forge a compromise. My hope is that the administration and the Congress will still find a way to give the industry the temporary assistance it needs while demanding the long-term restructuring that is absolutely required."